An exodus of buy-to-let landlords is threatening the financial viability of future housing developments, after the number of investors buying off-plan properties slumped.
Plunging demand from landlords means under-construction house sales have overtaken flats for the first time since 2007.
The fall in off-plan sales of flats risks causing a funding crunch for developers, experts warned, which could reduce housing supply in the future.
One in three (34pc) new homes in England and Wales were sold before they were completed last year, down from a peak of 46pc in 2018 and the lowest share since 2013, according to analysis by Hamptons estate agents.
Traditionally, housebuilders have used advance, off-plan sales to investors as a key means of funding developments. But now the decline of the buy-to-let market means this model has crumbled. Just 21pc of off-plan purchases were made by investors in 2022. Back in 2015, the share was 70pc.
This comes as the Government unveiled a wave of new regulations for the private rental sector last week and follows repeated tightening of the tax regime in recent years.
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Ben Beadle, chief executive of the National Residential Landlords Association, a trade body, said: “This is another sign that the Government’s policies are hurting and not working.
“Actively discouraging investment in the rental market and implementing tax rises are leaving growing numbers of tenants struggling to find anywhere to live. Ministers need to reverse gear and develop pro-growth tax measures.”
David Fell, lead analyst at Hamptons, warned that the slowdown in off-plan sales would mean “far fewer homes will be built in 2023” than in recent years, as builders are also grappling with a drop in demand following the end of the Help to Buy equity loan scheme.
“Slowing sales rates mean that some